The outlook for the US job market is looking brighter.

Far fewer Americans are seeking unemployment benefits than just three months ago — a sign that layoffs are falling sharply.

The number of people applying for benefits fell last week to 366,000, the fewest since May 2008. If the number stayed that low consistently, it would likely signal that hiring is strong enough to lower unemployment.

The unemployment rate is now 8.6 per cent. The last time applications were this low, the rate was 5.4 per cent.

The big question is whether fewer layoffs will translate into robust hiring. It hasn’t happened yet, even though job growth has been rising consistently each month.

The four-week average of weekly unemployment applications, which smooths out fluctuations, dropped last week to 387,750. That’s the lowest four-week since July 2008. The four-week average has declined in 10 of the past 12 weeks.

Applications for unemployment benefits are a measure of the pace of layoffs. Job cuts have fallen sharply since the recession, but so far employers are hiring at only a modest pace. When applications fall below 375,000 — consistently — that usually signals that hiring is strong enough to lower the unemployment rate.

The downward trend suggests that companies are cutting fewer workers as the economy picks up. It also comes as Congress is wrangling over whether to extend emergency unemployment benefits, which are set to expire at the end of this year.

Growth may top three per cent in the final three months of this year, according to many economists. That would be up from two per cent in the July-September quarter.

Other recent reports suggest the job market is improving a bit. In the past three months, net job gains have averaged 143,000 a month. That compares with an average of 84,000 in the previous three months.

In November, employers added 120,000 jobs, and the unemployment rate fell to 8.6 percent from nine per cent. That was the lowest unemployment rate in 2 1/2 years. But about half that decline occurred because many of the unemployed gave up looking for work. When people stop looking for a job, they’re no longer counted as unemployed.

Employers posted fewer jobs in October than in the previous month, the government said Tuesday, though the decline was modest.

Job openings have risen by about 35 per cent since the recession officially ended in June 2009. But they’re still about 25 per cent below pre-recession levels.

About 6.7 million people are receiving unemployment benefits. About 2 million will lose their benefits by mid-February if the emergency programme expires.

Lawmakers differ over how long benefits should last. The House passed a Republican bill Tuesday that would renew emergency aid but reduce the maximum duration to 59 weeks from the current 99 weeks.

Democrats want to keep the full 99 weeks. The measure is part of broader legislation in the Democratic-led Senate that would also extend a Social Security tax cut.